The MGM China Holdings Limited (HKG:2282) Annual Results Are Out And Analysts Have Published New Forecasts

Last week, you might have seen that MGM China Holdings Limited (HKG:2282) released its yearly result to the market. The early response was not positive, with shares down 7.0% to HK$12.40 in the past week. The results were mixed overall, with revenues slightly ahead of analyst estimates at HK$5.1b. Statutory losses by contrast were 2.1% larger than predictions at HK$1.37 per share. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

Check out our latest analysis for MGM China Holdings

Following the latest results, MGM China Holdings' 16 analysts are now forecasting revenues of HK$15.1b in 2021. This would be a sizeable 197% improvement in sales compared to the last 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 96% to HK$0.061. Before this latest report, the consensus had been expecting revenues of HK$15.4b and HK$0.017 per share in losses. So it's pretty clear the analysts have mixed opinions on MGM China Holdings even after this update; although they reconfirmed their revenue numbers, it came at the cost of a massive increase in per-share losses.

As a result, there was no major change to the consensus price target of HK$12.79, with the analysts implicitly confirming that the business looks to be performing in line with expectations, despite higher forecast losses. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on MGM China Holdings, with the most bullish analyst valuing it at HK$15.50 and the most bearish at HK$9.20 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. For example, we noticed that MGM China Holdings' rate of growth is expected to accelerate meaningfully, with revenues forecast to exhibit 197% growth to the end of 2021 on an annualised basis. That is well above its historical decline of 0.9% a year over the past five years. Compare this against analyst estimates for the broader industry, which suggest that (in aggregate) industry revenues are expected to grow 33% annually. So it looks like MGM China Holdings is expected to grow faster than its competitors, at least for a while.

The Bottom Line

The most important thing to take away is that the analysts increased their loss per share estimates for next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. The consensus price target held steady at HK$12.79, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on MGM China Holdings. Long-term earnings power is much more important than next year's profits. At Simply Wall St, we have a full range of analyst estimates for MGM China Holdings going out to 2023, and you can see them free on our platform here..

Even so, be aware that MGM China Holdings is showing 1 warning sign in our investment analysis , you should know about...

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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